Faraday Copper surges on $73M capital raise backed by Lundin, BHP

[Ben Graham]

Faraday Copper (TSX: FDY) is undertaking a C$100 million ($73 million) private placement backed by investors such as including the Lundin Family Trusts and BHP Group (ASX: BHP) to fund the ongoing development of its projects based in Arizona. Shares of the company surged.

In a statement on Monday, the Vancouver-based copper developer said it plans to issue up to 23.81 million common shares at C$4.20 per share, which is the same as its market open price. Closing of the placement is expected by March 11.

Trusts settled by the late Adolf H. Lundin — currently the company’s largest shareholder — are expected to participate in the financing. BHP, which became a major investor following last week’s deal to sell its San Manuel property to Faraday, is also looking to participate.

BMO Capital Markets, in a note published on Monday, said the C$100 million financing “is stronger than previously modeled” as it previously anticipated a smaller amount of C$45 million and at a lower share price of C$3.00. The financing also came earlier than the bank’s forecast, as the announcement essentially came right after Faraday’s transaction with BHP.

The proceeds are also expected to fund certain expenses related to the BHP transaction, Faraday said.

Former underground mine

On Friday, Faraday announced that it will acquire BHP’s San Manuel property, which is located 19 km southwest of its flagship Copper Creek property in Pinal County. As consideration, BHP will receive 30% of its issued and outstanding common shares — representing about C$300 million ($220 million) in implied value — and have the right to participate in future equity raises to maintain its ownership.

The transaction, once completed, allows Faraday to consolidate two adjacent properties in the heart of the Arizona copper corridor. Its 100%-owned Copper Creek property is host to a large, 3-km-long porphyry copper deposit that holds 422 million tonnes in measured and indicated resources grading 0.48% copper equivalent, for nearly 4.5 billion lb. of contained metal.

The San Manuel property comprises two deposits that operated as a combined underground block cave and open‑pit mine between 1955 and 1999. During that time, it was one of the largest underground mines in the US, generating over 4.5 million tonnes of copper production. The project currently has a non-43-101-compliant resource totalling 14 billion lb. of copper, according to company estimates, and has no recent exploration records.

‘Multi-generational’ copper district

“The combined project has the potential to become a multi-generational copper district delivering made-in-America copper, while providing significant economic opportunities to the local communities,” Faraday’s CEO Paul Harbidge stated in the Friday press release. “This would allow for the optimization of infrastructure and minimized environmental footprint compared to each project advancing independently.”

Haywood Capital Markets said in a note that the transaction is “transformational” for Faraday, as it would create “a major copper district” with the potential to produce 100,000-150,000 tonnes per annum of copper for decades.

Shares of Faraday Copper surged to a 52-week high of C$4.51 on Monday following the announcements, taking its market capitalization to C$1.13 billion ($830 million). Following the BHP transaction, Haywood raises its price target for the stock from C$4.00 to C$5.50. BMO also lifted its target from C$4.50 to C$5.00 after the C$100 million financing.